Ethics & Public Policy Center

Keeping the Pressure on Obamacare

The Obamacare implementation disaster is far worse than even the most pessimistic critics predicted before the October 1 launch. The fiasco that has been on full public display for the past two months is so bad for the president and his party that it will have lasting political and policy effects, no matter what Republicans do at this point. But that doesn’t mean the GOP should be complacent. With the health-care law now more vulnerable than ever, Republicans in Congress should keep the pressure on to hasten its demise and pave the way for a far better alternative.

The first order of business remains thinking through what to do about canceled individual-market policies. Prior to last week, it would have been unthinkable that the White House would unilaterally adopt a policy allowing millions of people to stay in their individual-insurance plans in 2014. After all, notwithstanding that famous presidential pledge, a major focus of Obamacare is the termination of the individual insurance market and the shifting of that market’s participants into the Obamacare exchanges in 2014. An escape route that allows large numbers of current individual-insurance enrollees to avoid the exchanges in 2014 (even one with its own set of traps) raises the very real possibility that the exchanges will falter before they ever get started.

This does not mean that the GOP should be applauding the White House’s supposed “fix.” For starters, the administration’s plan is completely lawless, as many others have noted. The president has not altered any regulations or asked Congress to provide a carve-out for the 2013 insurance plans. He instead announced he would not enforce the law for a year, which the administration claims should be enough for state regulators and the insurance industry to reopen the canceled plans.

Of course, this is not the way to run the government. In the near term, it’s not at all clear that states and insurers aren’t still exposed legally. What if an insurance enrollee sues an insurer for not providing an Obamacare-required benefit? Would that have standing in court? Who knows?

The administration’s “fix” also comes with a lot of unwelcome Obamacare political baggage. The administration is shamelessly using its regulatory leverage to compel free advertising for its failing health law. In letters to enrollees, insurers opting to reopen their closed plans are required to include information that is clearly intended to promote Obamacare and the insurance plans sold on the exchanges.

Given all of this, House Republicans were more than justified in passing the legislation sponsored by Energy and Commerce Committee chairman Fred Upton last week, even after the president made his announcement. If enacted, the Upton legislation would provide legal certainty for state regulators and insurers that the individual-market plans of 2013 could be reopened and sold throughout 2014. Further, it makes it clear that enrollees in these plans would not be subject to the individual-mandate tax for not enrolling in an Obamacare-compliant plan in 2014.

Many observers have already pronounced the Upton legislation dead, given hostility to it from the White House and Senate Democrats. But if we have learned anything from recent weeks, it is that what seemed impossible yesterday may be possible, even likely, tomorrow. The unfolding Obamacare debacle could yet force Democrats into such a retreat that Upton and much else could pass the Senate and be signed into law.

Still, the GOP must realize that the White House’s “fix,” however sketchy, is better exploited than opposed. That means encouraging insurers to reopen their individual-market plans based on the administration’s imperfect assurances. Many insurers are balking at the large costs and operational hassles associated with reversing the cancellations. Republicans should not echo those sentiments. Yes, it will be expensive for insurers to change course. But the insurers are partly responsible for this mess by whistling past their own graveyards for the past four years. They decided some time ago to try to accept the baggage of Obamacare in exchange for a guaranteed market of compulsory health insurance. It was a bad deal that the industry is only now realizing was a historic mistake. Undoing the damage will entail some costs for the industry, but those costs will only increase if contingency planning does not begin right away.

The realization that any escape route out of Obamacare’s mandates furthers the cause of repeal by destabilizing the law should also inform the GOP’s views of the competing Democratic plans in the Senate. Senator Mary Landrieu’s proposal to reinstate “guaranteed renewal” provisions in the canceled 2013 plans, and thus force insurers to keep their policies open for any enrollees electing to renew, is a much more heavy-handed approach than the Upton legislation, to be sure. But it is also a policy with some bipartisan history, as Doug Badger has noted. Legislation passed by a Republican Congress and signed by President Bill Clinton in 1996 required insurers to include guaranteed-renewal clauses in all individual-market policies, with the option to renew left entirely up to the enrollees. Reinstatement of such a provision on a mandatory basis should not be ruled out by the GOP.

It is of course a different matter to require insurers to reinstate guaranteed renewal after the insurers had already sold plans on the assumption that the market was closing than it is to require guaranteed renewal on policies sold prospectively. A retroactive mandate is never easy to justify. Nonetheless, these are very unusual times, and millions of individual-market enrollees are likely to become uninsured unless some clear and definitive action is taken. Moreover, if guaranteed renewal is reinstated on a permanent basis, as the Landrieu bill would do, it means millions of people can escape the Obamacare exchanges for multiple years if not indefinitely. It would be far better if the insurance industry and state regulators voluntarily reopened the canceled plans in every state. But it is already clear that regulators in some deep-blue states are so committed to the Obamacare approach that they won’t go along with President Obama’s concession. In this environment, the Landrieu approach is far better than nothing. Senate Republicans should thus be open to working with Senator Landrieu and other Democrats on a bipartisan solution, and House Republicans should be willing to compromise with the Senate on a bill that could be sent to the president.

Some critics contend that it is already too late for a legislative remedy. It will certainly be difficult at this point to get everyone who will lose their insurance on January 1 reenrolled in their plans right away. But this isn’t just a January 1 issue. Many more Americans will see their plans canceled throughout 2014, and they will surely benefit from the choices provided by a legislative fix. Moreover, it would be far better for those losing coverage on January 1 to get it back starting February 1 than to lose it permanently.

The other piece of the puzzle that must not be forgotten is the individual mandate. The Obama administration has still not made it clear whether or not persons who stay in their old individual-market plans that aren’t grandfathered and don’t meet the ACA’s requirements will be forced to pay the tax for not having insurance. At a minimum, the Obama administration should be forced to clarify this issue. The continued legal uncertainly is one more reason for a legislative remedy that clearly and specifically exempts from the mandate tax anyone who stays enrolled in newly grandfathered individual-market plans, as the Upton legislation would do.

But the GOP should not stop there. Obamacare’s most vulnerable provision remains the mandate. It’s already very weak, and yet the law’s supporters are counting on it to salvage the faltering program. The assumption is that, eventually, many millions of people will sign up for insurance in the Obamacare exchanges because they will have no other choice. But it is also clear that, if pressed, Democrats can no longer defend the mandate based on what has transpired over the past two months. The enrollment process simply does not work, and, even if it did, millions of middle-class Americans will find the plans being offered on the exchanges far too expensive for them to purchase. Americans don’t trust Obamacare. Forcing them into this program is a non-starter politically.

That’s why, in early December, the GOP should again press the case for a one-year delay of the mandate tax. It will be a win-win proposition. At that point, the website may be limping along, but it will still not be fully functional. Democratic support for compelling people into this dysfunctional system will be faltering. If Democrats continue to resist a delay anyway, the GOP will have an issue that could become the focus of the entire 2014 midterm election. And if Democrats agree to the delay, it will be one more step toward undoing the damage of Obamacare.

Obamacare’s first contact with reality hasn’t gone well. Some are counseling opponents to stand back and wait for the law to collapse. A better approach is for the GOP to come to the rescue of the law’s victims and in so doing speed its ultimate demise.

James C. Capretta is a senior fellow at the Ethics and Public Policy Center and a visiting fellow at the American Enterprise Institute.